Duke Energy (NYSE: DUK) and Progress Energy, Inc. (NYSE: PGN) announced Monday that both companies’ boards of directors have unanimously approved a definitive merger agreement to combine the two companies in a stock-for-stock transaction.
The combined company, to be called Duke Energy, will be the country’s largest utility, with approximately $65 billion in enterprise value and $37 billion in market capitalization.
It will also have the country’s largest regulated customer base, providing service to approximately 7.1 million electric customers in six regulated service territories North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio.
Duke Energy is aggressively pursuing smart grid deployments with commercial partners Cisco (NASDAQ: CSCO), Echelon (Nasdaq: ELON) and Ambient (ABTG.OB). However Duke Energy and Progress Energy were both criticized recently by NC WARN for clinging to outdated growth figures in justifying new coal-fired power capacity.
The merged companies will have approximately 57 gigawatts of domestic generating capacity from a diversified mix of coal, nuclear, natural gas, oil and renewable resources–and it will own the largest regulated nuclear fleet in the country.
“Our industry is entering a building phase where we must invest in an array of new technologies to reduce our environmental footprints and become more efficient,” said Jim Rogers, chairman, president and Ceo of Duke Energy. “By merging our companies, we can do that more economically for our customers, improve shareholder value and continue to grow.
Under the merger agreement, Progress Energy’s shareholders will receive 2.6125 shares of common stock of Duke Energy in exchange for each share of Progress Energy common stock. Based on Duke Energy’s closing share price on Jan. 7, 2011, Progress Energy shareholders would receive a value of $46.48 per share, or $13.7 billion in total equity value.
Duke Energy also will assume approximately $12.2 billion in Progress Energy net debt. The transaction price represents a 7.1% premium to the unaffected closing stock price of Progress Energy on Jan. 5, 2011, and a 3.9% premium to the closing stock price of Progress Energy on Jan. 7, 2011.
The transaction price also represents a 6.6% premium to the average closing stock price of Progress Energy over the last 20 trading days ending Jan. 5, 2011, and a 6.4% premium over the last 20 trading days ending Jan. 7, 2011.
Following completion of the merger, officials anticipate Duke Energy shareholders will own approximately 63% of the combined company and Progress Energy shareholders will own approximately 37% on a fully diluted basis.
Duke Energy expects to effect a reverse stock split immediately prior to closing, and, as a result, the exchange ratio will be appropriately adjusted at that time to reflect the reverse split.
Structure, Organization & Leadership
When the merger is completed, Rogers will become executive chairman of the new organization. In this role, Rogers will advise the CEO on strategic matters, play an active role in government relations and serve as the company’s lead spokesperson on energy policy. Johnson will become president and CEO of the new company.
Both Rogers and Johnson will serve on the board of directors of the combined company, which will be composed of 18 members, with 11 designated by Duke Energy’s board of directors and seven designated by Progress Energy’s board of directors.
The combined company will be headquartered in Charlotte and will maintain substantial operations in Raleigh.
Pending regulatory approval, the companies are targeting a closing by the end of 2011.
Loading...
How will a reverse stock split be beneficial?
A reverse stock split reduces the number of shares and increases the share price proportionately. Since this merger involved the addition of each of the company’s stock, they probably want to adjust the number of shares available.
how does a reverse split affect the dividend paid
Have yet to see a reverse split benefit
share holders.